The United States economy is in tough times and that should continue for some time according to Galaxy Digital CEO Michael Novogratz. The latter, however, thinks that there is reasons to be optimistic about cryptocurrency.
The crisis should continue in the United States according to Novogratz
On March 15, Michael Novogratz was interviewed in an interview with the Squawk Box on the American channel CNBC. The CEO of Galaxy Digital returned to the liquidity crisis that is currently hitting banks in the United States. And for him, things are not going well.
Novogratz said the credit crunch is creeping into the US economy and other alternatives should be considered. For him, now is a good time to invest in treasuries such as gold, silver and bitcoin.
The United States should not be the only country affected since the credit crisis should spread to the whole world according to its forecasts. Novogratz thinks now is the time to go long in Gold, Silver and Bitcoin.
To prove that a credit crunch is about to happen, Novogratz said you have to look at the traditional banking system. In effect, banks start lending less money when they want to replenish their capital.
This should lead to a credit crunch and therefore a crisis could ensue. Another element is the evolution of the commodity market, which is an indicator of the recession that is gradually setting in.
The current crisis was caused by the back-to-back collapse of three major crypto-friendly banks in the same week: Silvergate Bank, Silicon Valley Bank, and Signature Bank. These bankruptcies precipitated the American banking system into difficulties which it is still struggling to overcome.
Given the current anxiety-provoking context, the US Federal Reserve should revise its plans. According to Novogratz, the Fed should completely change its interest rate hike policy that it would like to continue in order to curb inflation. However, if she went through with her plans, it would be a “huge policy mistake” in Novogratz’s words.
Cryptocurrency is doing better despite tough times in the US economy
Michael Novogratz asserted that the difficulties encountered by the American economy should not rub off on the crypto market, on the contrary. He foresees a rise in cryptocurrencies thanks to this crisis.
For him, the time to invest in Bitcoin and altcoins is now. He recalls that Bitcoin was created to serve as a reserve value in case the traditional financial system suffered a crisis. According to the logic of the CEO of Novogratz, when a crisis becomes too strong, governments make the decision to print too much money, which lowers its value.
Reserve stocks, on the other hand, are seeing their prices rise and that is exactly what happened with Bitcoin. At the time of the fall of Silicon Valley Bank, the price of BTC also fell. However, its price performed well with new highs in 2023. According to CoinMarketCap, BTC hit $26,514.72 on March 14.
The traditional financial system is entirely responsible for the current crisis
The fact that failing banks were crypto-friendly quickly led some to point the finger at digital assets for the ensuing crisis. However, experts believe otherwise.
For example, crypto can’t be blamed for Silicon Valley Bank bankruptcy because it is purely a problem of traditional finance. The bank was unable to hedge interest rate risk and made itself vulnerable to market changes.
The financial institution was unable to insure its obligations after a large unexpected outflow of funds as was the case with the demands of depositors. It was the combination of funding risk and this unexpected cash outflow that caused SVB to go bankrupt.
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